Liability for the Costs of Non-Parties

In Individual Homes Limited v Macbream Investments Limited (The Times,†14 November 2002) the court closed a potential loophole in the Civil†Procedure Rules (CPR) and confirmed its jurisdiction and discretion to†award costs in favour of a non-party when that non-party has been†compelled by witness summons to provide evidence to assist a party.

Background

The claimant, Individual Homes Limited,†sought specific performance of an†agreement for the sale and purchase of†land. One of the issues in the case was†whether the defendant, Macbream†Investments Limited, was able to complete†the transaction at the time it served a notice†to complete on the claimant. The claimant†alleged that the property was subject to a†mortgage and that the mortgagee (Halifax†Bank of Scotland plc (the Bank), which was†not a party to the case) had not agreed to†the sale and would not have agreed to†discharge its mortgage to allow completion.†To prove this, the claimant needed various†documents held by the Bank.

The usual method for obtaining documents†from a non-party post-CPR is to make an†application under section 34 of the Supreme†Court Act 1981 (SCA) and CPR 31.17 for†non-party disclosure. If this procedure had†been adopted, the Bank would have been†able to recover the costs it incurred in†complying, under CPR 48.1(2).

The claimant chose instead to proceed†under Part 34 of the CPR, serving a witness†summons on an employee of the Bank,†requiring that employee to attend the trial†and to produce certain of the Bank's†documents. Part 34 compensates a witness†only for travel expenses and loss of time in†attending at court. This meant that the Bank†could not recover the legal costs it incurred†in taking advice on the summons, or the†costs it incurred in collating the documents†requested by the claimant.

The Bank complied with the witness†summons and prepared for its employee†to produce the requested documents.†The night before the Bank's employee was†due to attend court to give evidence, the†claimant informed the Bank that he, and the†documents, were no longer required. The†claimant declined to reimburse the Bank for†the wasted costs it had incurred.

Not surprisingly, the Bank applied to the†court for an order that it be joined as a†party to the proceedings for the purposes of†costs, and that an order for costs be made†in its favour.

Decision

Deputy High Court Judge Alan Steinfeld QC†cited with approval a suggestion in the†Supreme Court Practice, Volume 1, that...